German investor belief plunges

GERMAN investor confidence fell the most in 16 months in March, exacerbated by the bombings in Madrid, amid concern about the strength of a recovery in Europe’s largest economy, the ZEW Centre for European Economic Research said.

The Mannheim-based ZEW said its index of institutional investor and analyst sentiment fell to 57.6, the lowest since August, from 69.9 in February. Economists expected a drop to 65.8, according to the median forecast of 34 Bloomberg News surveyed.

The index touched a 42-month high in December.

“The decline reflects the fact that many analysts are beginning to pare their economic growth forecasts for Europe and Germany,” said Martin Hochstein, who helps manage about $4.6 billion at SEB Investment-Fonds GmbH in Frankfurt.

If it is proven that al-Qaida was behind the Madrid attacks, “then this will have global implications on sentiment and risk aversions will rise.”

Germany’s BGA exporters’ and wholesalers’ group yesterday pared its growth forecast for Germany’s economy by a fifth, citing the euro’s impact on exports and hesitant consumers. Consumer spending stagnated in the fourth quarter, leading to slower growth in the dozen euro-nation economy. The threat of further attacks may damp household confidence further.

ZEW said the index measuring only the responses received before the Madrid bombings was 59.1. The index after the attacks shows a reading of 55.9. About 45% of responses came after the attacks, the institute said. At total of 313 investors and analysts were surveyed.

Europe’s Dow Jones Stocks 50 Index has fallen more than 4% since Wednesday. Stocks were rising at the beginning of the year on optimism of a recovery. A videotape purportedly from al-Qaida showed a man claiming responsibility for the bombings and saying that more attacks are planned. Germany’s DAX index has slipped more than 5% in the period. The Dow Jones Industrial Average shed more than 1.8%.